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MANILA, Philippines (UPDATED) - Philex Mining Corp., the country's poster firm for responsible mining, is considering its options in contesting the government's over P1 billion fine for the tailings leak at its only operating mine.

On Thursday, September 27, Philex senior vice president Mike Toledo said they will "exhaust all administrative remedies," including responding to Mines and Geosciences' (MGB) letter on the massive fines for the tailings pond leak at Padcal mine in Benguet province.

"Going to court is a last resort. But, first things first, we will contest the P1 billion fine of MGB, then elevate this to DENR (Department of Environment and Natural Resources), then let's see," Toledo told Rappler in an interview.

Philex has 7 days to respond to the September 26 letter of the MGB informing them of their fine for violating the Mining Act.

The letter said: "The total volume discharged sediments (solid + liquid) to Balog River is 13,513,507 cubic meters. With sediments having a bulk density of 1,531 metric tons of solids per cubic meter, the total weight of discharged solids is 20,689,179.42 metric tons."

"Under the law, Philex is compelled to pay the fine within 15 days but this is still negotiable," Jasareno told reporters on September 27.

Jasareno said this fine excludes the penalty of P200,000 per day arising from violation of the Clean Water Act.

Force majeure

Philex's Toledo said they are willing to shoulder the cost of clean-up efforts in affected rivers, the lost livelihood opportunities for those in nearby communities, but will contest the fine.

"It is not the amount but the admission that we were negligent," said Toledo. "If you are liable to a fine, it supposes that you are negligent."

Toledo was referring to MGB's letter sent to Philex president Eulalio Austin Jr., citing that the mining firm has in place standard operating procedures in operating its tailings pond and that employees were not remiss in ensuring the integrity of the facility.

The leak and the resulting shut down is expected to hit not just Philex's financial performance this 2012, but send a chilling effect on the rest of the mining players

In his one-on-one #TalkThursday interview before the fine was announced, Philex chairman Manuel Pangilinan said the mine is set to remain shut until the end of 2012 and would likely wipe over P2.5 billion off its profits.

Investors have reacted. Philex's share price in the local stock market has slumped.

In a mining conference mid-September, executives of Philex's peer companies said they commend the Pangilinan-led firm for being transparent and announcing immediately that there was an incident at the Padcal mine.

They said this was different from previous mine accidents, including the Marcopper and Rapu-Rapu ones, which are sins of the industry's past that continues to hound.

The Marcopper disaster involved a leak at its 1.2-million-metric-ton pond facility that affected the Boac River in Marinduque province.

The Padcal tailings pond, on the other hand, flows into the San Roque river, one of the largest in Luzon. The river and the tributaries leading to it irrigate hundreds of hectares of farmlands in Pangasinan and power the turbines that produce electricity for the Luzon grid.

"We would be talking here of a massive permanent disaster for most of Pangasinan, Luzon ’s prime rice granary, perhaps unprecedented in Philippine history," noted Bernie Lopez who writes for Opinyon Magazine.

Philex had claimed the leakage is not toxic after they examined fish in nearby rivers to be negative in heavy metals.

Business environment

The Philex incident comes at a time when the Aquino government is finalizing the mining rules that govern the controversial extractive industry.

As its poster firm for responsible mining is engaged in a major environmental, financial and regulatory battle, the mining industry has largely been quiet in the past months despite the provisions of the Aquino government's mining policy under Executive Order 79 and its implementing rules and regulations (IRR) that they say are disadvantageous to them.

This changed in mid-Sept, a month after the Philex incident in the Padcal mine.

On September 19 at the mining conference where large and medium firms converged to discuss issues and strategies, Chamber of Mining of the Philippines president Philip Romualdez dropped a bomb: the IRR has provisions that are "patently illegal" and that they will sue the government if it would implement them.

During the 3-day conference, several mining industry executives blasted the mining council, especially Paje, for inserting these contentious provisions in the IRR without proper legal checks.

The Pangilinan interview where he said the Aquino government seemed to be changing the rules in the middle of the game.

President Aquino immediately met with the mining council that drafted the IRR and, by September 24, revisions to some of the provisions the mining industry find contentious in the IRR were announced. Communications Secretary Ricky Carandang said these were made to address the business industry's concerns and to avoid suit.

Meantime, Pangilinan was engaged in other other battles. He said Senator Trillanes, who apparently was the Aquino government's backdoor negotiator with China, was lying when the youngest lawmaker in Senate said there was no substantial gas deposits in the Reed Bank controlled by a Philex unit, Forum Energy. The exploration activities at Reed Bank, which lies in an area the Philippines is asserting as part of its sovereign territory and that China is also claiming as theirs, have stopped a few times due to security issues.

At the same time, Pangilinan also announced he stopping financial support for his alma mater, the Ateneo de Manila University, following the school's stand on mining. A few days after, the former president of Ateneo, Fr. Bienvenido Nebres, resigned from the board of one of Pangilinan's most lucrative businesses.

The announcement of the P1 billion fine comes amid these personal and business woes. - Rappler.com

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Welcome to Rappler, a social news network where stories inspire community engagement and digitally fuelled actions for social change. Rappler comes from the root words "rap" (to discuss) + "ripple" (to make waves).